GOOG Conference Call: ‘Glass’ Not a Luxury Item, Just Early Days, Says Page

By Tiernan Ray

During a conference call this evening following a report by Google (GOOG) of Q1 revenue that slightly missed expectations, and a per-share profit that easily beat consensus, CEO Larry Page spoke with analysts about what he considered a “strong start to 2013.”

Page kicked things off by talking about how great the company’s “Google Now” intelligent assistant is on mobile devices using its Android operating system, noting that the service can give users of smartphones their boarding passes, package delivery updates, and traffic conditions. He also trumpeted the company’s voice search capabilities.

Page, recalling various “leaps” the company has taken, such as introducing Gmail and Android, said it was his job to “get people focused on things that are not just incremental.”

“It’s why we’re investing in what appear to be speculative projects to you today such as self-driving cars, ” he said. “We found with ambitious goals on a committed teams you can make progress pretty quickly.” Page said he “gets chills” when he uses “Google Glass,” the heads-up information display that Google has built into a wearable eyeglass device. “Some day we’ll all be amazed that computing involved fishing around in pockets and purses,” said Page.

Google exec Nikesh Arora went into detail about the company’s advertising products, declaring that the company’s business is “strong across search and display, including the continued rise of mobile.”

Arora spoke about progress with “Enhanced Campaigns,” the new ad-buying product the company rolled out last quarter that allows for buying across multiple screens. Google hopes enhanced campaigns will streamline, and boost, buying of ads on mobile devices.

“In the first two months since launch, more than 1.5 million campaigns have already been upgraded to enhanced campaigns and these clients are beginning to see great results,” said Arora. “We expect to migrate all campaigns that we manage by the end of the current quarter.”

Arora also waxed enthusiastic about Google’s display advertising progress, an area where it has come behind to take business from Yahoo! (YHOO)in the last few years:

Over the past year, the number of advertisers using our Google Display Network Reserve option has increased four-fold. Now we have two-thirds of the top 100 Ad Age brands using those products. This is really helpful in developing deep partnerships with our clients, especially in the branding arena. For example, we’re now working directly with adidas in Germany on a new global branding budget. Brand are also continuing to see the power of YouTube to help them reach consumers across screens. Today more than 1 billion people are finding the channels they love on YouTube every month. Users are now watching over 50 million more hours a day compared to a year ago, a 50% increase.

During the Q&A session, CFO Patrick Pichette told analysts that the company’s gross revenue from its “Play Store” application store for Android is now becoming big enough that the company is changing its accounting for revenue from the operation:

Beginning if Q1, however, the entire $0.30 is now booked at gross and the payments to the carriers and the OEMs are now booked on other cost of revenue. So that is the big change that has happened and basically the reason why we did this is as part — as we were looking through the second half of 2012, we were seeing these used to be kind of immaterial numbers for us. And then when we saw through the second half 2012, we decided to kind of tune our accounting policies and made that change in Q1.

When an analyst asked Page to elaborate on whether Glass would come down from its $1,500 price tag at the moment, Page conceded the price is high, if not exactly luxury goods status, but that the product is in early days:

I would say it is early days. Just handing over small numbers so far. I think that probably pretty good at third party ecosystems, experience on Android and different areas, so I’m not too worried about that. There’s been lots of speculation on that. I would just say it’s all early. And I think the price tag was set for developers for early test. Clearly I’m not sure I’d call it a luxury price but certainly a pretty high price. I think that what I’m doing with my Glass, I think what do people do with Glass, I find the photo taking, the video, phone calling, click messaging, directions, all to be pretty amazing experience and that’s the core functionality we built into the device. We’re excited to really get it out to some developers and have other people create some amazing experiences with it which we haven’t thought of yet. But like I said, it’s still early days but I think it’s very exciting. Next question, please.

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About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.